(Older post) With 30 June fast approaching, here are 5 tips that business leaders and finance managers should consider to ensure that Bank relationships are enhanced next financial year:

1. Maximise your working capital – for the next 3 years banks will judge the success of your year on the financials produced on 30 June. If you can make special effort to maximise gross margin, minimise operating expense, chase all the debtors you can, run down inventory levels and push out creditors, then you will ensure that your financials are showing as positive outcome as possible.
2. Fix up negative current ratio balances – if you have a current ratio (ie current assets over current liabilities) which is negative, talk to your accountant to see what you can do to make this positive prior to year end. Perhaps you have related party loans that are blowing this number out? Perhaps you have short term borrowings listed that are actually long term in nature (see No 3)?
3. Seek bank reviews for short term facilities prior to years end – where the business has large non current debts that are due to mature in the next financial year, the business will be required to post these debts as current liabilities. However if the bank can confirm that facilities will be rolled over for a further 12 months prior to 30 June, then the business may be able to retain these liabilities as non current. Speak to your Accountant about this and whether this is likely to impact you.
4. Provide your bank with a plan for the next year, including a budget – ensure that you are suitably conservative and that only calamity will prevent you from achieving the budget. Note too that this budget does not need to be the same budget that you are using to motivate and incentivise your team. Be detailed with your assumptions, and provide insight to the bank on how the business plans to tackle industry and economic challenges which are well pulicised and might be concerning the bank.
5. Confirm that you will meet your covenants – if you have a suspicion that you will not meet them, then find out early and incorporate this news into your budgetting process. By telling the bank proactively, you have the opportunity to control the messaging, giving the bank some comfort that whilst you aren’t meeting their hurdle requirements, you are aware of this, and you have a plan to fix it.